Mid East expansion boosts repair biz

26 July 2006

Middle Eastern carriers are thriving in
the aerospace market and are implementing ambitious fleet renewal and
expansion programmes which in turn benefits related industries.The airline growth is backed by substantial cash
reserves, air transport liberalisation efforts and highly effective
business strategies focusing on long-haul connecting air traffic.
Consequently, demand for maintenance, repair and overhaul (MRO) services
in the region is set to double in the next six years.

Frost & Sullivan finds that the Middle Eastern Airframe and Engine MRO Markets earned
revenues of $1.79 billion in 2005 and estimates this to reach $3.31
billion in 2012.

Overseas MRO suppliers have identified Middle East’s potential and are
considering market entry through partnerships, joint ventures and
subsidiaries. Another clever and attractive option is the acquisition of
former state-owned and airline-affiliated MRO suppliers, which will
provide the entrants an initial captive business.

“Influenced by the proliferation of low-cost carriers and the
privatisation of former airline-affiliated Middle Eastern MROs,
maintenance outsourcing will become widespread,” says Frost & Sullivan
Research Analyst Diogenis Papiomytis. “Middle Eastern and international
MRO suppliers should assess the market’s potential and identify the
needs of airlines, being fully aware that any investment in
infrastructure will have a lead time of one to two years.”

Once suppliers estimate the costs of the proposed investments, they can
integrate these costs into the business proposal for new facilities and
capabilities. Such forethought will be especially useful in handling the
hectic pace of business in the wake of air travel boom in the Middle
East.

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Air travel is intensifying in the region because of the increasing
popularity of Middle Eastern airports as hubs for connecting flights. As
a result, all companies participating in the air transport industry are
experiencing a windfall. There is a corresponding rise in demand for MRO
services in the Middle East - higher than the expected demand in any
other region.

“MRO suppliers’ revenue generation opportunities are primarily expected
to stem from the line maintenance market and subsequently, across all
airframe and engine MRO market segments,” notes Mr. Papiomytis.

To capitalise on these opportunities, regional MRO suppliers are
restructuring their operations. They are working on building the
capacities and capabilities required to service Middle East’s future
aircraft fleet.

Many airline-affiliated MRO suppliers are waking up to the benefits of
commercialisation and privatisation to reduce their dependence on a
single carrier. Suppliers need to develop detailed business plans
regarding the required investments and assess all future market
opportunities and risks. ——-